NEW DELHI: The Group of Ministers (GoM) formed by the GST Council to review the composition scheme under the Goods and Services Act 2017, has recommended a higher eligibility cap for businesses to avail of the plan and a lower tax rate for traders, restaurants and manufacturers.
Currently, the threshold for the composition scheme, which had earlier been Rs 75 lakh, stands at Rs 1 crore. The GoM has recommended that it be raised again to Rs 1.5 crore. As per the scheme, business that have an annual turnover of below the threshold and above Rs 20 lakh are charged GST at nominal rates (1-5%).
However, the GoM, headed by Assam Finance Minister Himanta Biswa Sarma, has also recommended that rates applicable under the composition scheme be tweaked as well. Sarma told reporters that the panel has suggested that the rate for traders be reduced to 0.5 percent from one per cent and that manufacturers and small restaurant owners pay a uniform composition rate of one per cent.
Under the current scheme, traders, manufacturers and restaurant owners have to pay a GST rate of 1 per cent, 2 per cent and 5 per cent of their turnover, respectively.
“We have taken the view that composition scheme should be more flexible for restaurant owners and manufacturers,” Sarma said. Input tax credit, currently unavailable for restaurants, has also been recommended. “But, the Council should decide what should be the slab of tax, considering the revenue loss,” Sarma added. Other recommendations include allowing businesses who are engaged in inter-state sale to avail the composition scheme.
As of now, around 15 lakh businesses have opted for composition scheme. There are several advantages for businesses operating under the scheme. For instance, while a regular taxpayer has to pay taxes on a monthly basis, under the scheme it is only required to file one return and pay taxes on a quarterly basis. A composition taxpayer is also not required to keep detailed records that a normal taxpayer is supposed to maintain.The final call on these recommendations will be taken by GST Council when it meets on November 10 in Guwahati, Assam.
While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to file only one return and pay taxes on a quarterly basis.
Also, a composition taxpayer is not required to keep detailed records that a normal taxpayer is supposed to maintain.
The GoM was set up earlier this month and was tasked with revisiting the tax structure of different categories of restaurants with the aim of rationalising or reducing the rates, apart from making composition scheme more attractive for businesses.
Currently, GST is levied at 12 per cent on non-AC restaurants, while it is 18 per cent for air-conditioned ones.
The other members of the GoM are Bihar Deputy Chief Minister Sushil Modi, Jammu and Kashmir Finance Minister Haseeb Drabu, Punjab Finance Minister Manpreet Singh Badal and Chhattisgarh Minister of Commercial Taxes Amar Agrawal.
The GoM has also suggested that manufacturers engaged in job works can be allowed to opt for composition scheme, the official added.
(with PTI inputs)